Pefindo assigns 'A' rating to PLN

JAKARTA (JP): Indonesia's Pefindo credit-rating agency has reaffirmed its "A" long-term rating for both Bond IV, and Bond V, amounting to Rp 680 billion (US$290.6 million), and Rp 1 trillion, respectively.

The bonds are issued by the State Electricity Company (PLN).

The "A" rating means PLN debt security has a low investment risk, supported by good capacity to pay all interest and principal on time, with low susceptibility to adverse changes.

Pefindo announced the reaffirmation of the rating reflected PLN's favorable standing, provided by the regulatory frameworks and the company's monopolistic position in the market.

The rating agency based its assessment on the healthy growth of demand for electricity in Indonesia, and the PLN's strong financial flexibility.

"We've also accounted for the company's lessening profitability, stable leverage and deteriorating liquidity," Pefindo said.

PLN is currently facing pressure over its financial performance, which falls short of projected targets, accompanied by apparent deteriorating liquidity.

Pefindo noted PLN's crash programs in power generation in 1994 had resulted in the deterioration.

The rating agency foresees additional complexity to PLN financial management, as a result of the privatization drive initiated by the government in the power generation sector.

The privatization, and PLN's large investment programs for the 1996-2000 period, have combined to place PLN in a delicate position, since they must respond to various government agencies and multi-lateral financial institutions, Pefindo noted.

PLN's leverage is favorable, with the company's debt-to-equity ratio of 71 percent.

However, the rating agency contends the ever-increasing investment needs of the transmission and distribution sectors may impose a slight shift in PLN's current leverage position, as the company is constantly pressured to increase self-financing.

But Pefindo also sees positive development in cost management, as reflected in the disciplinary programs initiated in inventory management. (vin)